Intel’s first quarter earnings for 2014 were for the most part fairly tepid. Sure, they were able to post an earnings of $0.38 per share on $12.8 billion in revenue, however this only beat analyst’s fairly conservative expectations of $0.37 per share by $0.01. On $12.8 billion in revenue, Intel showed operating income of $2.5 billion and net income of $1.9 billion. Intel’s net income for Q1 2014 was down 5% over the same period a year ago, nothing to cheer about but still much better than previous declines. They also saw an increase in revenue of about $200 million, even though there was a slight decrease in profitability of about the same amount.

The truth is that Intel’s performance this past quarter was not anything especially exciting write about. The most exciting thing for most, however, was the fact that Intel was essentially flat. To many, that came as an indication of their stemming the tide of PC declines and growth in enterprise and server. Also, remember, that before this earnings report, Intel changed how they report their revenue for certain divisions based on new product groups. So now things are categorized under the following 5 categories:

  • PC Client Group revenue of $7.9 billion, down 8 percent sequentially and down 1 percent year-over-year.
  • Data Center Group revenue of $3.1 billion, down 5 percent sequentially and up 11 percent year-over-year.
  • Internet of Things Group revenue of $482 million, down 10 percent sequentially and up 32 percent year-over-year.
  • Mobile and Communications Group revenue of $156 million, down 52 percent sequentially and down 61 percent year-over-year.
  • Software and services operating segments revenue of $553 million, down 6 percent sequentially and up 6 percent year-over-year.

If you look at their new break down of revenue (and profitability) per division, you can see that their PC Client Group is still the bulk of the company’s revenue followed closely by the Data Center Group. All of the others are still relatively at around $500 million or less in terms of revenue, and even less in terms of profitability towards Intel’s bottom line.

But if Intel wants to become a truly competitive company in the mobile space their Mobile and Communications Group is going to need to grow much faster rather than shrinking 52% sequentially and 61% year over year. Not just that, but at $156 million this is actually their smallest business segment which is a bit concerning when you think about how important Mobile and Communications are to Intel’s future.

Intel’s CEO Brian Krzanich said about their earnings, “In the first quarter we saw solid growth in the data center, signs of improvement in the PC business, and we shipped 5 million tablet processors, making strong progress on our goal of 40 million tablets for 2014. Additionally, we demonstrated our further commitment to grow in the enterprise with a strategic technology and business collaboration with Cloudera, we introduced our second-generation LTE platform with CAT6 and other advanced features, and we shipped our first Quark products for the Internet of Things.”

The truth is that Intel is buying their tablet share and it remains to be seen if that 40 million tablets for 2014 goal is really going to be worth it for Intel to effectively eat the profitability for the sake of penetration. Their lack of communications penetration is their biggest weakness and I’m not entirely sure it was a good idea for Intel to commit an entire division to IoT solutions without a solid definition for IoT even existing yet. There is no doubt that Intel is gungho on growth and expanding their product lines, but the real question is whether or not they can help reinvent the PC in ways that make it relevant while also making sure they are a serious player in the mobile computing AND communications front. Sure, they’ve landed themselves inside some of the Samsung Galaxy S5 phones, but their lack of consistent design wins is concerning to say the least. Qualcomm needs a serious and stable competitor and I’m not entirely convinced that Intel is there yet.

Since their earnings announcement, Intel is basically flat (was up 0.60% yesterday and gave up 0.40% over night).